Africa is Islamic banking’s new frontier

IN 2008 Ethiopia’s conservative central bank experimented: it authorised interest-free banking. Interest is prohibited under sharia law, so the move was lauded as a step towards expanding financial services for the country’s large and often poor Muslim minority. But momentum soon stalled. An attempt to launch a fully-fledged Islamic bank foundered. Today most of Ethiopia’s big commercial banks offer a narrow range of Islamic financial products, but to few customers. Islamic finance in Ethiopia was stillborn.

Outside Africa, Islamic finance is in much healthier condition. Between 2007 and 2014, the sector tripled in size (although growth has slowed lately). Total assets are around $1.9trn. Sub-Saharan Africa accounts for less than 2% of this, yet it should be especially fertile territory. The continent’s Muslim population is 250m and growing. And according to the World Bank, as many as 350m Africans do not have a bank account.

IN 2008 Ethiopia’s conservative central bank experimented: it authorised interest-free banking. Interest is prohibited under sharia law, so the move was lauded as a step towards expanding financial services for the country’s large and often poor Muslim minority. But momentum soon stalled. An attempt to launch a fully-fledged Islamic bank foundered. Today most of Ethiopia’s big commercial banks offer a narrow range of Islamic financial products, but to few customers. Islamic finance in Ethiopia was stillborn.

Outside Africa, Islamic finance is in much healthier condition. Between 2007 and 2014, the sector tripled in size (although growth has slowed lately). Total assets are around $1.9trn. Sub-Saharan Africa accounts for less than 2% of this, yet it should be especially fertile territory. The continent’s Muslim population is 250m and growing. And according to the World Bank, as many as 350m Africans do not have a bank account.